Birmingham, the second-largest city in the United Kingdom, has essentially declared itself by ceasing all non-essential spending, with equal pay claims totaling up to 760 million euros ($954 million). For the fiscal year 2023–2024, the city now anticipates a deficit of 87 million euros ($109 million).
The Birmingham City Council submitted a Section 114 notice on Tuesday ordering the suspension of all expenditures other than for necessities. The council had trouble paying equal pay claims totaling 650 to 760 million euros.
Why is this taking place?
Birmingham has long struggled with rising social care costs, declining business tax revenues, and rising inflation. A case for equal pay was won by 5,000 female council employees more than ten years ago at an employment tribunal after they claimed they were denied bonuses typically given to men, according to the BBC.
Since then, the city council has settled equal pay claims for almost 1.1 billion euros, and its monthly bill is rising by 14 million euros. Even worse, there were issues with Birmingham’s new Oracle IT system, which manages payments, data, and background checks. Originally estimated to cost 19 million euros, the price has now increased to approximately 100 million euros due to three years of delays.
Birmingham cannot commit to any new spending and is unable to pay its financial obligations, as evidenced by the Section 114 notice. Additionally, it came under fire for hosting the Commonwealth Games in 2022 despite having financial difficulties.
External auditors expressed concerns about the funding for equal pay claims and how Birmingham would be able to generate additional income given the enormous deficit anticipated for this year, according to the interim director of finance for the council, Fiona Greenway.
The Rishi Sunak administration, meanwhile, claimed that it has been “engaging regularly with them to that end and has expressed concern about their governance arrangements and has requested assurances from the leader of the council about the best use of taxpayers’ money.”
What will occur next?
Due to their obligation to provide statutory services like education, social care, waste collection, housing services, and others, city councils are unable to declare bankruptcy. According to the Birmingham City Council, all new spending will be halted with the exception of initiatives to safeguard the weak and statutory services.
John Cotton, the council’s leader, also insisted on the protection of essential services while admonishing the need for “tough and robust decisions” to save the city’s crumbling finances. Birmingham’s hosting of the 2026 European Championships has also sparked controversy.
The Conservative Party has criticized the Labour-run Birmingham council for failing to “show the proper speed and urgency needed to tackle equal pay” because of this. Sharon Thompson, the council’s deputy leader, accused the successive Conservative parties of “taking away” funding totaling 1 billion euros.
Prime Minister Sunak had disqualified a bailout for Birmingham City Council in July as the council tries to manage a sizable bill for equal pay claims. He declared: “Bailing out the council for its financial mismanagement was not the government’s job.”
Later this month, the council will hold an emergency meeting, and it’s anticipated that there will be additional discussions with the government to determine a course of action.
Conclusion:-
Birmingham, the UK’s second-largest city, has stopped all non-essential spending and filed equal pay claims worth 760 million euros ($954 million). The city expects a 2023–2024 deficit of 87 million euros ($109 million). Birmingham City Council issued a Section 114 notice suspending non-essential expenditures. The city has struggled with rising social care costs, falling business tax revenues, and inflation. Over ten years ago, 5,000 female council employees won a case for equal pay after being denied bonuses for men. Since then, the council has settled equal pay claims for nearly 1.1 billion euros and increased its monthly bill by 14 million euros. The city cannot pay its bills or commit to new spending.
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